Question

How can the government affect productivity?

Answer 1

Growth in productivity in advanced economies has significantly slowed since the global financial crisis. As a result, productivity often cited as the most significant source of long-term economic growth has become a policymakers ' concern. Policymakers understand the implications of low productivity growth for individual wage growth, business profitability and investment efficiency, and government revenue growth. Less support for productivity-enhancing spending in areas such as infrastructure, education, and R&D is an unfortunate consequence of lower government revenue growth.

At the national level, governments pursue policies that influence the productivity of both individuals and companies by using five levers: infrastructure, universal education, labor regulations, economic diversity, and international business and trade relations.Go beyond the advice of the traditional economist to get the market conditions right, and "create far stronger incentives for companies to invest in better tools, better technologies to increase productivity." Such opportunities may include tax policies to encourage investment in resources by companies that will increase efficiency. Or' systematic, platform technologies that increase efficiency across sectors, Establish a' Research and Development Policy focused on spurring the development of productivity-enabling technologies, such as robotics,' Governments need to concentrate a much larger share of their R&D budgets on developing technology that will minimize the need for labor.